LONDON: To alleviate the financial burden on millions of households in the face of raging inflation, the United Kingdom announced a 25% levy on oil and gas company profits.
The tax would be phased out as a temporary policy "when oil and gas prices return to historically more normal levels," with a sunset clause written into the legislation, Chancellor Rishi Sunak said in the House of Commons on Thursday, as per reports. The levy was first proposed by the opposition Labour Party, but it received little support from the government.
Sunak, on the other hand, has stated on many occasions that nothing was off the table in the face of the worsening cost-of-living crisis. Sunak stated on Thursday that the levy "will encourage investment rather than deter it." He also stated that the government is doubling overall investment relief for oil and gas companies, which means that "for every pound a company invests, they will receive 90% in tax relief."
Currently, the oil and gas industry pays a 40% headline rate tax on profits, making it one of the most taxed industries in the UK. The new levy raises the combined rate of profit tax to 65%.
This change of attitude occurred after some energy behemoths reported record profits as global energy prices skyrocketed. BP reported in early May that its underlying profit for the first three months of this year had increased dramatically, from USD2.6 billion to USD6.2 billion in the first three months of 2021.